“The higher you rise in an organization, the more you have the play the role of organizational architect.” – Michael Watkins, Harvard Business School
Case Study 9-399-094 from Harvard Business School asks how Specialty Medical Chemical’s new CEO, Carl Burke, should restructure his senior management team to grow the company’s product lines and sales, and create value for shareholders.* In his first 90 days, Carl has discovered his senior management team is weak, and sales have slowed. Carl has developed a new strategy for the business, developing three new divisions to focus on developing, marketing and selling new pharmaceutical, generic and biotech products. Now, he needs to create the management team to carry out his vision.
* Specialty Medical Chemicals appears to be a pseudonym. Perhaps, as they used to intone on Dragnet, the “names have been changed to protect the innocent.”
Specialty Medical Chemicals’ products have matured, and without significant new product development, top-line revenue and earnings will stall, just as the company’s market capitalization already has. His task is to reignite growth and create value.
Carl has an additional challenge. As a new leader within the organization, he has a limited timeframe in which to make changes. Michael D. Watkins, a former Harvard Business School faculty member and author of The First 90 Days: Critical Success Strategies for New Leaders at All Levels, says “If you fail to build momentum during your transition, you will face an uphill battle from that point forward.”
SMC is a publicly traded company, and investors won’t wait forever for growth. In fact, if analysts rate the company’s prospects poorly, it could begin to affect the institutional investment community’s willingness to invest. Carl needs to take action soon.
Although financials are not given for SMC, we can assume the company is profitable, just not growing as it should. Also, we aren’t aware of what the chairman and Board of Directors want Carl to do, but we can presume they want greater returns for shareholders over time.
Acccording to Watkins, once you determine an organization’s strategy is sound, you have to bring structure into alignment with strategy. Carl needs to put structure and strategies into place, and then measure the results. However, some of Carl’s ideas could stand much more study: For example, how will manufacturing cope with multiple demands from multiple divisions? What capacity will it need to add? The same is true of sales, finance, marketing, customer service and the other support functions. Do they have the bandwidth to do what Carl proposes? How will he preventing infighting for scarce resources? What additional funding will be needed?
There are good reasons for shifting some members of the team into new roles: to prevent certain VPs from leaving, to broaden the team members’ indiviual compentencies, and to strengthen weaker areas. However, Carl should first develop a detailed strategic plan with more detail on what the measures of success will be, and the scale the company needs to develop, before he restructures the management team. How does he know he’s correctly identified the positions without a more detailed plan? Then, he can restructure the management team if necessary to match competencies and abilities with organizational needs, and develop goals, incentives and measures.